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Notifying the CRA of your Canadian Residency: NR74 Residency Application

If you are new to or returning to Canada, you may want to have the Canadian authorities deem you a resident of Canada for Income Tax Purposes so that you are taxed as a Canadian resident. To make that determination, you should fill out a NR74 Determination of Residency Status application form

Individual residency is on a case-by-case basis, and there are no strict rules. There are guidelines and interpretations by the Canada Revenue Agency on the subject, however. The CRA reviews your residential ties to Canada, how long you have been in the country, where you normally reside and a number of other factors to make its determination. Based on that outcome, you could be taxed or not taxed.

Being deemed a Canadian resident for income tax purposes is particularly important if the Canadian tax rate is lower than the rate in the country from which you left. It is also possible that the country from which you left will not require you pay any tax if you are paying taxes in Canada. In doing so, you gain a considerable tax advantage.

Additionally, if you have moved to Canada permanently, you may not want to file and pay taxes in another country nor deal with foreign tax authorities.

How Does International Taxation Work for Dual-Citizens or Immigrants?

Most countries around the world have a tax treaty with Canada, which is intended to prevent double taxation.

Tax treaties typically determine which of the two countries has the right to tax a person’s income first. Naturally, every country will prefer to be the first-to-tax country, as this is the country that will be entitled to the larger portion of tax. This is because the other country will be entitled only to the differential between the tax rate in the first country and its own tax rate, essentially getting only the second, smaller portion of tax.

Canadian taxation obligations are based on your residency status and not based on your citizenship. If a dual citizen is deemed to be a resident of Canada, he will pay the Canadian tax and receive a Foreign Tax Credit (FTC) to evidence the Canadian tax portion paid. The FTC is then presented to the foreign tax authorities, permitting the country to only tax the individual on the difference between the Canadian FTC and the foreign country’s rate of tax.

FAQ’s:

What is the criteria that the CRA uses to determine if one is a Canadian resident for income tax purposes?
Individual residency is on a case-by-case basis, and there are few strict rules. However, tax treaties can affect the way that residency is determined on a country-by-country basis. The CRA reviews your “residential ties” to Canada, how long you have been in the country, where you normally reside and a number of other factors to make its determination.
Which form do I fill out to determine if I am a Canadian resident for income tax purposes?
To find out whether the CRA deems you to be a Canadian resident for income tax purposes, you should fill out a N74 Determination of Residency Status if you are entering Canada: https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/nr74/nr74-fill-s-17e.pdf, or an NR 73 form if you are entering Canada.
Does Canada’s taxation rules depend on Canadian residency or Canadian citizenship?
Canadian taxation obligations are based on your residency status and not based on your citizenship. To find out whether the CRA deems you to be a Canadian resident for income tax purposes, you should fill out a N74 Determination of Residency Status: https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/nr74/nr74-fill-s-17e.pdf
I am a dual citizen of both Canada and a foreign country. Which country will I have to pay income tax to?
Who you pay taxes to will depend on the particular tax treaty that Canada has with the foreign country of your dual citizenship. Tax treaties often affect this, and typically work to prevent individuals being tax residents of more than one country. It is common for Canadians who earn income in another country, but live in Canada, to have tax withheld at source in that other country. Where this occurs, or they otherwise pay tax in another country, a “Foreign Tax Credit” reflecting tax provided in Canada that offsets Canadian tax.

Why you Need a Tax Lawyer

With years of experience in corporate and commercial law & tax law, Kalfa Law is your perfect partner for all your legal tax needs in submitting an NR74 residency application on your behalf in order to minimize or streamline you international legal tax obligations.

Returning or New to Canada? We’re here to help™.

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